HSBC Bank Malta plc - Interim Results

Performance Overview

During the period under review, the HSBC Malta Group generated €63.5 million in net interest income representing a 6.1% drop from the previous comparable period. This drop was due to a 7.4% reduction in gross interest income to €82.3 million reflecting the lower interest generated from the Bank’s loan book (as a result of repricing in the prevailing low interest rate environment together with lower average lending balances) as well as due to the lower interest income earned on debt securities as the proceeds of matured bonds had to be reinvested at lower yields. The adverse impact from lower interest income was only partially offset by the 11.7% drop in interest expense to €18.8 million as customers opted for shorter dated deposits which carry lower rates.

Net fee and commission income was practically unchanged at €15.6 million. Meanwhile, HSBC Malta Group registered an 8% increase in trading profits (foreign exchange related activities) to €4.9 million and a 60% increase in gains on the disposals of available for sale investments to €3.6 million. The latter was achieved on the back of higher levels of disposals than in the previous comparable six months.

The life assurance business reported a pre-tax profit of €8 million compared to €7 million in the first six months of 2012 reflecting improved product performance.

Overall, HSBC generated €98.6 million in net operating income which is only marginally below the €99.1 million recorded in the first six months of 2012.

Administrative expenses increased by 1.1% to €42.1 million mainly reflecting a higher contribution to the depositor guarantee scheme and a rise in compliance, security and fraud-risk related costs. Meanwhile, depreciation and amortisation dropped by 5.3% to €3.2 million. As a result, non-interest expenses amounted to €45.2 million leading to a marginally higher cost to income ratio of 45.9% from 45.4% as at 30 June 2012.

During the first six months of 2013, the Bank registered a net impairment of €0.35 million, less than the €0.8 million incurred in the previous comparable period.

Overall, the HSBC Malta Group registered a pre-tax profit of €53 million compared to €53.3 million in the first six months of 2012. After accounting for a tax charge of €18.7 million (June 2012: €18.8 million), the net profit for the period under review amounted to €34.3 million which is practically unchanged from the €34.5 million net profit registered during the first six months of 2012. This translates into an unchanged earnings per share of €0.118.

The balance sheet as at 30 June 2013 shows total assets of €5.7 billion reflecting a decline of 2.4% from the level as at 31 December 2012 mainly reflecting the decline in both retail and wholesale loans. Similarly, customer deposits also dropped by 1.6% to €4.4 billion reflecting the volatility in corporate and institutional deposits which offset the increase in retail deposits which was achieved in spite of heightened competition. As a result, the advances to deposits ratio increased to 75%. Following the profit registered during the period under review, shareholders’ funds grew by 5.3% to €421 million which translates into a net asset value of €1.445 per share.

Commenting on the interim results, CEO Mr Mark Watkinson explained that the Group continued to deliver resilient results for its shareholders against a very challenging European backdrop.

Dividend

The Directors declared an unchanged gross interim dividend of €0.10 (net: €0.065) to shareholders as at the close of trading on Monday 12 August. The dividend will subsequently be paid on 5 September.